Can ambiguity about rare disasters explain equity premium puzzle?

Yuanping Wang and Congming Mu

Economics Letters, 2019, vol. 183, issue C, -

Abstract: We study the effects of ambiguity aversion to diffusion risk and jump risk on asset prices in a production-based asset pricing model and find that ambiguity aversion to jump risk can resolve equity premium puzzle and risk-free rate puzzle.

Keywords: Equity premium puzzle; Risk-free rate puzzle; Ambiguity aversion; Production-based asset pricing (search for similar items in EconPapers)
JEL-codes: D81 E22 E23 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:183:y:2019:i:c:36

DOI: 10.1016/j.econlet.2019.108555

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